OTTAWA—A failure to carefully regulate the Canadian bitumen industry is putting Canada on a dangerous economic and environmental trajectory, says a new report released today by the Canadian Centre for Policy Alternatives (CCPA) and the Polaris Institute.

The study’s original, integrated analysis shows that the current bitumen path is creating the double threat: a “staples trap,” whereby the faster Canada exports its bitumen, the less diversified, productive and resilient the economy becomes;” and a “carbon trap,” which locks Canada into an carbon dependent development path, making the costs of future climate adaptation much more difficult.

“Canada’s current bitumen strategy is not only damaging to the environment, but is leaving our economy highly vulnerable to shrinking markets for bitumen, as the world moves to less polluting fuels,” says Tony Clarke, co-author of the report, pointing out that export prices for Canadian bitumen (like natural gas before it) are already falling due to evolving market conditions.

“Another consequence is an unbalanced and vulnerable boom-bust economy where production is increasingly concentrated in unprocessed products; where manufacturing and other tradeable industries contract; and where production and employment shift to non-tradeable industries, damaging Canada’s productivity and wellbeing,” says co-author Jim Stanford.

The study presents a wealth of empirical data indicating the negative side effects of unregulated bitumen developments for Canada’s trade, exchange rate, productivity, and income distribution performance and proposes a two-track approach to steer away from the “bitumen cliff:”

regulate more tightly the bitumen industry to slow the pace of extraction, enhance Canadian content in upstream and downstream activities, and attain a better balance between sectors and regions of the economy; and
reorient Canada’s economy around more balanced, innovative, and low-carbon industries.
“We need to encourage a different way of thinking on the part of policy-makers and Canadians generally, and steer a course that is consistent with the our nation’s long term economic and environmental interests,” Clarke says.

“We must overcome the false polarization between the economy and environment, and recognize that the future course of these enormous developments cannot be left to a largely deregulated market and the self-interested choices of private industry,” says Stanford.

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The Bitumen Cliff: Lessons and Challenges of Bitumen Mega-Developments for Canada’s Economy in an Age of Climate Change, by Tony Clarke (Executive Director, Polaris Institute), Jim Stanford (Economist, Canadian Auto Workers), Diana Gibson (former Director of Research, Parkland Institute in Alberta), and Brendan Haley (Ph. D. candidate, Carleton University) is available on the CCPA website: http://www.policyalternatives.ca